National Insurance is a tax that workers in the United Kingdom pay in order to receive certain state benefits. This tax is deducted from the employee’s salary and is based on how much they earn. Knowing how much you can earn before having to start paying National Insurance can help you plan your finances and save money. This article will explain how much you can earn before having to pay National Insurance in the United Kingdom.
How Much Is National Insurance?
National Insurance is a tax that is deducted from your salary, and the amount you pay depends on how much you earn. It is paid both by employees and employers, but the amount each pays is different. Employees pay a certain percentage of their salary in National Insurance, while employers pay a flat rate. The amount you pay in National Insurance also differs depending on how much you earn.
What Is the National Insurance Threshold?
The National Insurance threshold is the amount you can earn before you have to start paying National Insurance. This threshold depends on your age and whether you are self-employed or employed. For those aged 16 or over who are employed, the threshold for the 2021-22 tax year is £9,568, which equates to £192 per week. Self-employed workers have a slightly higher threshold at £9,967, or £193 per week.
How Is National Insurance Calculated?
National Insurance is calculated based on how much you earn over the National Insurance threshold. Those who are employed will pay 12% of their income over the threshold. For example, if you earn £10,000, you would pay 12% of the £432 above the threshold. This means you would pay £51.84 in National Insurance. For those who are self-employed, the rate is 9% of income over the threshold.
What Other Benefits Does National Insurance Provide?
Paying National Insurance not only helps you qualify for certain state benefits, such as the State Pension, but it also helps you build up a record of your contributions. This record is used to calculate how much State Pension you will receive when you retire. It also helps you qualify for other benefits, such as maternity allowance and bereavement benefits.
What Happens If You Don’t Pay National Insurance?
If you don’t pay National Insurance, you won’t be able to qualify for certain state benefits. You may also be liable for a penalty if you don’t pay the correct amount of National Insurance. This penalty can be up to 100% of the amount you owe, so it’s important to make sure you keep up with your payments.
Are There Any Exceptions?
Yes, there are some exceptions to the National Insurance threshold. For example, those aged over the State Pension age don’t have to pay National Insurance, regardless of how much they earn. Additionally, those who are employed and earn less than the National Insurance threshold don’t have to pay National Insurance, but they may not be eligible for certain benefits.
Knowing how much you can earn before having to pay National Insurance can help you plan your finances and save money. The National Insurance threshold differs depending on your age, employment status, and how much you earn. It is important to pay your National Insurance, as it helps you qualify for certain state benefits. Additionally, you may be liable for a penalty if you don’t pay the correct amount of National Insurance.